UK mid- / small-cap

Shocking_Blue

Dear all,

Was looking to add some UK mid-/small- cap to my portfolio. I know they’re not the same funds and directly comparable , but I’ve narrowed it down to the following two, due to their market cap styles:

ASI UK Mid-Cap Equity Fund I Acc

Vanguard FTSE 250 UCITS ETF | VMID

The performance of the first of these has been really good, mainly due to it’s growth focus I guess. The second seems broader and less risky.

Just wondered what thoughts were on either of these two, and UK mid-/small- cap in general. I’m hesitant because of the possible impact the Covid economic clear up and Brexit will have on UK mid- / small-cap. Is it worth hanging off a bit?

Thanks.

 

Linton

We wont know the medium/long tterm effect of Covid for some time, and BREXIT for much longer.  Trying to time world events is going to be very difficult/impossible.  If the fund you choose is the right one, it must be right independent of current circumstances as you are not going to continually chop and change.

So you have a growth option and a balanced option.  In my view you should choose in the contect of your portfolio as a whole - does it need growth or a balance?

Exiled_Tyke

I like this area of the market (a lot) and it has performed very well during the crisis probably because of the industries represented: a lot of technology for a start.  Whilst it is likely to be more volatile than say the FT100 (which I would never bother with personally) or the All-Share index I reckon over the long term it will do well.   Personally I like the HSBC 250 fund - probably larger than you would like but being a tracker does well. At the other end of the spectrum I like the Marlborough UK Micro - cap.   I'm also in Merian Small cap which doesn't actually have holdings which attract me but has done incredibly well for me.  Their Mid-cap has also been a good performer.    I haven't ever invested in the funds you suggest but they look equally promising. Overall I think it's an exciting area to be in. 

Another_Saver

If you don't buy now, you're going to come into this problem again soon enough.
I'm 1/3 in the FTSE 250 so very biased towards it and I don't see the cause of its ridiculous outperformance of the 100 and wider global market since the dot com bubble (apart from this godawful year) running out, but continuing well into the foreseeable future. My long term total real return expectation from a FTSE 250 index fund is 5%-8% before costs (academic reasons).
The valuation is fine, not as cheap as it has been earlier in the year but still cheaper than at the start of the year before the crash - which was still only average.
It's a very low concentration index, the top 10 holdings take up about 1% each, the 100th 0.3%, the 250th 0.1% (ish) so it tapers off slower/is spread out much more than most all other indices and funds.
It's reasonably diverse, 20% equity investment trusts, 10% real estate, 6% infrastructure, 20% Industrials (mainly engineering, aerospace and defense, construction materials and a variety of services and manufacturers), 17% consumer and 13% financials (mainly insurance and the investment industry).
If you're worried about the UK exposure, 1/2 the earnings come from overseas.

The main arguments against are that it's a small subsection, about 1/6th of the UK market, so perhaps a higher conviction investment that you need to surer of to buy into. It can be more volatile, and has sometimes underperformed.

As an indexer I can't comment on active funds.

Shocking_Blue

Linton said:

We wont know the medium/long tterm effect of Covid for some time, and BREXIT for much longer.  Trying to time world events is going to be very difficult/impossible.  If the fund you choose is the right one, it must be right independent of current circumstances as you are not going to continually chop and change.

So you have a growth option and a balanced option.  In my view you should choose in the contect of your portfolio as a whole - does it need growth or a balance?

Thanks. It's core is balanced. This would be a 'satellite' type fund. It's just that UK mid-/small- cap is something that's sort of missing from my portfolio. Like Exiled-Tyke I think this is an interesting area, and I thin that post Covid there will be a huge emphasis on re-building the economy and supporting small/mid UK cap. On the other hand, with the Brexit thing being still up in the air, it's perhaps not the best time to invest in UK mid-/small cap- (in terms of what you'd pay for the fund at this time, although I'm not sure what positive impact post-Brexit clarity will have on this sector).

MonroeM

If there is a brexit trade deal in the short term it will be good for UK stocks whether large, mid, small or micro. However, in the long term it’s more to do with what happens with the UK economy in general. If you’re undecided as to which fund and not confident in making a choice then I personally would go with the more balanced HSBC 250 index fund or VMID ETF. 

Sue58

I have held the ASI UK Mid-Cap fund in my portfolio for a few years now and am very pleased with it. However, before investing, like you, I did also consider a FTSE 250 index fund. As far as I’m concerned there’s nothing wrong with either choice.